Understanding the nature of the stock market, including its pros and cons, doesn’t have to be confusing one. Many people fear that in order for them to know the nature of stocks, they have to understand a gamut of stock and marketing terms and all that jazz.

On the other hand, some people saw behind the veneer of all these economic gibberish, and saw the potentials of what they could get from investing in the stock market.

In a nutshell:

Simply put, the stock market is the market to buy and sell stocks (or shares). This is where company stock gets traded. The term is also used to describe the totality of all stocks in one country. That is why we hear reporters talking that “the stock market was up today” or that “the stock market went down after the dollar fell to the euro.”

What are the pros and cons of the stock market?

One of the reasons why we need the stock market is because it is an important factor for the US economic system to operate. Through the stock market, US companies improve their financial viability and expand their operations by raising funds from selling stocks. Without the stock market, our companies become slower in their growth and might falter in the increasing competition in the US as well as against international companies.

The fact that you can trade Stocks online is an advantage of investing in Stocks. Stock market investing using online applications like the internet has made stock market investing more efficient, secure and manageable to a lot of retail stock market investors. Unlike the traditional way of investing the stock market, online investing now has minimal services of a personal stockbroker that gives advise on recommended companies to invest in. Online stock trading companies have research reports, they publish articles by mainstream analysts and they provide the tools available in their websites that helps the investor makes investment choices.

Another reason for the existence of the stock market is that it also has a role in personal financial planning. This is because many individuals buy stock shares as part of their personal financial strategies. More importantly, most people have a stake in the stock market because retirement programs invest in stocks. It has shown that retirement programs earn a lot more by investing in common stocks than other options such as saving the funds in banks.

Of course, the stock market also has its downsides. Remember that the stock market is not a tool for instant success. True, there are cases of people getting wealthy by investing in the market, but this involves having shares in various company stocks, which means a lot of research, time, and money. One also gets rich when some stocks become “hotter” such as the “dot-com” bubble in the nineties, but when the initial buzz around these stocks falter, the value of these stocks tend to crash.

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